Homes for sale harder to come by

Sunday

Apr 27, 2014 at 12:01 AMApr 27, 2014 at 9:55 AM

In the summer of 2007, central Ohioans shopping for a home had more than 20,000 choices. Now, they have about 8,000. The number of homes on the market - called inventory in the industry - has steadily declined for the past seven years.

Jim Weiker, The Columbus Dispatch

In the summer of 2007, central Ohioans shopping for a home had more than 20,000 choices.

Now, they have about 8,000.

The number of homes on the market - called inventory in the industry - has steadily declined for the past seven years.

As the traditional selling season approaches, real-estate agents and experts are wondering why so few houses are for sale.

"This is the topic all day and all night at Realtor happy hours," said Don Bush, a veteran central Ohio agent.

Theories abound about the shortage of homes. Most cite the lingering hangover of the housing crash, but some suggest that home selection might be low for years to come.

The most common explanation is painfully simple: Many homeowners can't afford to sell.

Even though the housing industry is more than two years into a recovery, an estimated 23 percent of central Ohio homeowners with mortgages owe more than their homes are worth, preventing them from selling unless their lenders accept less than the debt - a short sale - or they bring cash to the table to cover the difference.

Even some who might have equity in their home are waiting for prices to rise before selling.

Two years ago, Becky Swartz considered selling her Dublin home, which is paid off. But she backed off after she saw what homes were fetching in her neighborhood.

"I was really close to putting the house on the market, but a house down the street sold really low," Swartz said. "I started to rethink it. I didn't want to because of the comps."

Another factor is less quantifiable but just as real: The crash shook confidence in housing as an investment, leading some homeowners to play it safe by staying put instead of taking on more debt in an asset whose future value is uncertain.

A consumer survey conducted by housing economists Robert Schiller and Karl Case has found that the anticipated growth in home values has dropped consistently since 2004-05.

"The big stumbling block is uncertainty," said Aaron Ansari, a software salesman who lives in Dublin.

Ansari and his wife, Becky, are leaning against selling their home after considering the idea for about a year.

"I'm comfortable in my position, and we have a safety blanket financially, but I'm hesitant to pull the trigger," he said. "This house we can pay off and have it taken care of.

"Why not stay here, and maybe get a retirement home or an investment home someday, instead of getting something bigger with more risk?"

Many industry experts expect inventory to increase this year, as homeowners seek to capitalize on strong demand and rising home prices.

But in a paper published last fall, researchers at the Federal Reserve Bank of San Francisco suggested that a reversal of the inventory shortage might not be that simple.

The paper showed that home prices and inventory levels had closely mirrored each other since the mid-1970s until 2012, when the pattern ended. Since then, home prices have risen steadily but inventory levels have continued to drop.

The huge number of so-called underwater homes provides one explanation, but other factors are also at play, experts say.

One is interest rates, which have risen almost a point since last spring. Homeowners reluctant to trade a low rate for a higher one decide to stay where they are.

"This is the first time in many, many years that we're in an increasing-mortgage-rate environment," said Svenja Gudell, director of economic research for the online real-estate site Zillow.

"I think we'll see some inventory tightness because people will say: 'I'm staying put. I can't duplicate this rate.'??"

Eden and Roger Sarver listed their Bexley home in January in anticipation of buying a home in nearby Eastmoor.

They soon had an offer on their Bexley home but couldn't negotiate a price for the Eastmoor property. After getting released from the offer for their home, they decided to remodel and stay put.

One reason: The couple pays 2.75 percent interest on their current 15-year loan, which they would not be able to match today.

Another reason: Because so few homes are available, they struggled to find something they liked enough to want to buy.

"We got quotes for remodeling the back half of the first floor, so we have gone forward on that," Eden Sarver said. "To be honest, we were relieved."

Lifestyle changes also help explain why fewer homes are being listed.

The real-estate and housing industries have long championed the idea of new homes for retirees or empty-nesters. But a growing number of senior citizens are instead choosing to stay put.

Emily Fogel considered selling her four-bedroom Northwest Side home when her husband died 18 months ago. At 76, she worried that she might be getting too old to care for the home.

But after weighing the pros and cons, she decided to stay.

"We've lived here since 1977, so all my friends and my social life are here," Fogel said.

"I decided that I might have to spend more money to hire people to do things for me, like mow the yard, but in the long run, that's preferable to moving to an unfamiliar place."

Whatever the reason, the dramatic decline in homes for sale has thrown a wrench into housing's recovery.

Home sales have dropped three consecutive months, in part because of low inventory. At the same time, the shortage of available homes has helped boost prices as buyers compete for homes as soon as they land on the market.

Lauren Cole, a 25-year-old dental assistant, discovered the shortage late last year when she started searching for her first home.

"I was looking for a specific type of home - an older historical home," Cole said. "There was a real shortage of those."

Cole's difficulty was compounded by her price range: She was looking for a home costing less than $200,000 in sought-after Clintonville, Worthington or Upper Arlington.

"By the time we would set up a showing, it would be in contract," Cole said of the first homes she liked.

"Then I got faster at it. I put offers on four houses and lost out on all four. They turned into either bidding wars or people going way over list price."

Last weekend, she had an offer accepted on a two-bedroom home in Worthington (for $2,000 more than the list price).

The inventory shortage also has forced real-estate agents to take extraordinary steps to find people willing to sell.

Agents desperate for listings or for homes to show clients are knocking on doors, mailing solicitations, handing out fliers or trying more extreme tactics.

Michael Mann, a broker with HER Realtors in Columbus, said some agents have reached out to home-repair companies to find homeowners sprucing up their properties in anticipation of selling.

Kelly Cantwell, a Street Sotheby's International Realty agent, searches the "for sale by owner" and "make me move" listings on Zillow, in which homeowners "list" their houses at often unrealistic prices to see whether they get any bites.

"I'm doing this to find homes for buyers because the inventory isn't enough," Cantwell said. "You really feel like you need to go door-to-door for people."

Bush, who is with HER Realtors, has several times mailed letters on behalf of clients to homeowners on specific streets or even entire subdivisions asking whether homeowners were ready to sell.

Recently, he took a more drastic step: While driving a client through Upper Arlington, he noticed a moving pod in front of a house. He stopped to ask whether the owners were moving.

They were, and Bush negotiated a deal for his client, who was interested in buying on the street.

"I tell clients in those hot areas, especially those old first-tier suburbs, to tell us exactly what they're looking for and if we see it pop up on listings, we'll look at it at lunch and if it's good, we'll tour it by the end of the day. You've got to move immediately."

Bush's story illustrates another reason that real-estate listings are so low. Many homes that change hands are privately sold and never make it onto the listings.

Eventually, of course, the time proves right for everyone to move.

Swartz, the Dublin woman who backed away from selling her home two years ago, is now thinking again of moving to a condominium near her daughter's house in Cincinnati.

First, though, she wants her children and grandchildren to visit during the summer.

"When my husband and I bought the house, we said we want our grandchildren to play in this house the way our kids did," she said. "They'll all be here in August, and I'll watch them run around the house and head to the school and play just the way their parents did.